North Korea Experiments With Freer Markets

Mr. Grover is a Young Voices Advocate and graduate student at George Mason University's Conflict Analysis and Resolution Program.

With North Korea in the news again, experts are once again questioning how long Kim Jong-Un can maintain his current path and power. After all, the Democratic People’s Republic of North Korea (DPRK) has been on the edge of societal and economic collapse for years and cannot persist without at least economic reform. It is, therefore, encouraging that an increasing number of North Koreans are experimenting with private property and the right to buy and sell as they see fit. Such liberalization needs to be further developed if the basic needs of the DPRK’s people are to be met and millions are to be lifted out of poverty. However, this could prove difficult since major reforms would take time and Pyongyang usually fiercely maintains its command economy.

This undated picture released by North Korea's official Korean Central News Agency (KCNA) on May 15, 2017 shows North Korean leader Kim Jong-Un (L) waving to the Korean People's Army construction department officials in Pyongyang. (Photo credit: STR/AFP/Getty Images)

During the great famine of the 1990s, many North Koreans were forced to engage in black market activities or in growing their own private food in order to avoid starvation. The famine was the result of centralized farming, withdrawal of Soviet and Chinese aid, severe flooding followed by a drought, and failures in the government rationing system. North Korea’s GDP crashed from sixteen to five billion in the early 1990s and didn’t return to sixteen until 2016.

Consequently, between two and three million North Koreans died. Conditions deteriorated to the point that in some areas people resorted to cannibalism. In 1995 a group of military officers planned a coup in the hope of finding a way to ease the mass suffering, but were discovered and stopped. Since then, new leader Kim Jong-Un, the third generation to rule North Korea, promised never to let the people starve, and has allowed a limited amount of private enterprise to flourish and underground trade to go unpunished.

The result has been a new, small, and growing middle class. Accurate data on the DPRK economy is difficult to come by, but there are some indicators that reflect a recovering –– and slightly freer –– economy. Over the last decade, North Koreans began to find ways around using North Korea’s hyper-inflated currency, the won, by using Chinese yuan and American dollars instead. This has become commonplace, a practice that was observed by researchers from John Hopkins University’s 38 North project as recently as February 2017. In fact, that research team was also able to visit the Kwangbok Area Shopping Center, a store modeled on Western malls.

One notable change in that store was the fact that items could be taken off the shelves and to a checkout counter as opposed to products being hidden behind a secure desk. Additionally, a wide variety of North Koreans were routinely shopping there and competing domestic and foreign goods were available, ranging from food to consumer electronics. The existence of choice and competition are normally deeply anathema to communist doctrine and North Korea’s own brand of Marxism. That ideology, known as Juche, is like a religion, with a cult-like reverence for the Kim family, a focus on economic and military national self-sufficiency, and an emphasis on North Koreans has a unique race with mythic origins and a unique destiny. The fact that North Korea has become more open economically despite how such changes contradicts Juche reveals that economically and socially DPRK is not what it was a decade ago.

A 2016 survey by the Center for Strategic and International Studies (CSIS), the only one ever conducted inside North Korea itself, supports these findings. That small survey of 36 people from different walks of life and provinces in the DPRK found that there was widespread anger towards government officials for their interference with citizen’s attempts to trade and to spend their limited money. All respondents agreed that Pyongyang did not provide the public goods and rations necessary to live well. CSIS also conducted a survey of 146 North Koreans refugees, in which 76.7% claimed they had engaged in market activity and bartering as a means to survive. Finally, another 2016 study by the Carnegie Endowment found that while most private enterprise is not officially allowed, it is given a pass since it now accounts for between 30 and 50% of North Korea’s GDP.

These changes have been slow in coming and complete reform, if it ever happens, will not happen overnight. Human rights and basic human needs in the DPRK are catastrophic. Millions of North Koreans are still malnourished and localized micro-famines are still the norm. Over 150,000 are locked away in gulags, awaiting death by starvation, forced labor, and torture. Many average North Koreans suffer from psychological trauma and have difficulty holding jobs.

But it is also a mistake to think of North Korea as a country in stasis, where no experimentation occurs. North Koreans are learning how to fend for themselves--instead of relying on the state--through the black market. In reality, the DPRK is best described as a highly repressive, but now three-tiered society, divided between an enriched political party elite, a new middle class mostly concentrated in the capital, and an impoverished majority that claws out a living in conditions reminiscent of the Middle Ages.

What is remarkable is that these shifts are largely unnoticed and unappreciated by the outside. Often times, many commentators rely on older information about countries and make assumptions before realizing that changes are underway. This has been the case with the slow, low-level marketization of North Korea and policy makers and the media ought to take notice. As a dictator, Kim Jong-Un has allowed a degree of economic choice and freedom, if only as a concession to necessity. Quite simply, it is harder to keep control of a country in which millions starve.

Yet these reforms should be taken for what they are: insufficient, but astonishing. Without a truly free market, the needs of millions of people will go unmet as goods are under produced and doled out only to the party elite. Despite this, a more competitive North Korea is astonishing because the very existence of these changes run counter to longstanding Juche dogma of self-reliance but were carried out or allowed anyway. North Korea is still the Hermit Kingdom, but it is beginning to learn that it cannot be so indefinitely.